Congress Gets Failing Marks on Economy in Year of Gridlock

Senate Majority Leader Harry Reid, a Democrat from Nevada, left, and House Speaker John Boehner, a Republican from Ohio, speak to reporters outside of the White House following a meeting with President Barack Obama in Washington on April 6, 2011. Photographer: Brendan Hoffman/Bloomberg

Dec. 16 (Bloomberg) -- Congress is ending what may be its
least productive year on record after government shutdown
threats, the collapse of debt-reduction talks and little action
to fix the worst U.S. economy since the Great Depression.

Just 62 bills were signed into law through November this
year, meaning that 2011 may fall short of the 88 laws enacted in
1995, the lowest number since the Congressional Record began
keeping an annual tally in 1947. In 1995, as in this year, a new
House Republican majority fought a Democratic president’s
agenda.

This year’s partisan battles brought the U.S. to the brink
of a government shutdown four times, caused a two-week furlough
of Federal Aviation Administration workers and led Standard &
Poor’s to lower the nation’s credit rating after it said
lawmakers didn’t do enough to reduce the federal deficit.

“It’s been one of the worst Congresses in modern
history,” said Representative Jim Cooper, a Tennessee Democrat.
“We have failed to meet our minimum standards of competency and
endangered America’s credit rating. We have failed to pass key
legislation on time. And there is very little hope for improved
behavior.”

Voter approval ratings for Congress are at record lows.
Republicans, ranked lower than Democrats, insist both parties
are to blame.

“People have a right to be frustrated and disappointed, so
next year may be a good year for challengers,” said Senator Jon
Kyl of Arizona, the No. 2 Senate Republican leader.

Risks to Economy

The inaction by Congress poses risks to the economy, said
Ed Yardeni, president of Yardeni Research Inc. in New York.
While the unemployment rate hovered around 9 percent most of the
year, he said Congress did little to stimulate job growth.
Lawmakers also were unwilling to make deep budget cuts or raise
taxes to rein in the deficit.

“Usually gridlock is seen as a good thing from the stock
market’s perspective, but clearly the out-of-control federal
deficit needs to be addressed and there is no political will to
do it,” Yardeni said.

S&P, in its ratings downgrade, said the government is
becoming “less stable, less effective and less predictable.”
Even so, the government’s borrowing costs fell to record lows as
Treasuries rallied.

The yield on the benchmark 10-year Treasury note fell from
2.56 percent on Aug. 5 to below 1.72 percent on Sept. 22. The
yield on the 10-year note was 1.84 percent at 2:35 p.m. New York
time today.

Voters Critical

The public is less sanguine. Seventy-six percent of
registered voters in a Nov. 28-Dec. 1 Gallup Poll said most
members of Congress don’t deserve to be re-elected, the highest
percentage in the 19 years Gallup has asked that question.

“It’s more likely that Republicans will be hit harder than
Democrats,” said David Rohde, a political scientist at Duke
University in Durham, North Carolina.

In a year dominated by budget clashes, Congress passed a
few significant measures.

Congress approved free-trade agreements with South Korea,
Colombia and Panama. The South Korea deal was the biggest since
1993’s North American Free-Trade Agreement.

Patent Overhaul

Congress overhauled the patent system, long sought by
companies such as International Business Machines Corp. and
Microsoft Corp, and extended the USA Patriot Act until 2015,
providing law enforcement continued power to track suspected
terrorists.

Such output pales compared with 2010, when Congress
approved a health-care overhaul, the biggest rewrite of Wall
Street rules since the Great Depression, a nuclear arms
reduction treaty with Russia and ended a ban against openly gay
men and women serving in the military.

This year’s trade and patent bills, while important, are
sideshows in the broader economic context, said Ross Baker, a
professor of political science at Rutgers University in New
Brunswick, New Jersey.

“Those are not insignificant things, but none of them get
to the meat of the economic crisis,” Baker said.

Most of President Barack Obama’s $447 billion job-creation
agenda was opposed by Republicans and some Democrats who
rejected his proposed new spending and tax increases on the
wealthy to help pay for it.

Tax Credits

Congress approved tax credits for companies that hire
unemployed veterans and canceled a requirement that federal,
state and local governments begin withholding 3 percent of
payments to contractors in 2013. This week, lawmakers are
working to extend a payroll-tax cut for workers through 2012.

House Majority Leader Eric Cantor, a Virginia Republican,
said a “fundamental divide” with Obama and a Democrat-controlled Senate stymied House Republicans, who sought to
repeal the president’s health-care overhaul and create a
Medicare voucher system.

House Speaker John Boehner of Ohio heralded a shift toward
cutting the size of government after Republicans forced $38.5
billion in budget cuts this year and Congress agreed in August
to reduce deficits by $2.4 trillion over a decade.

Social Security ‘Conversation’

“For the first time in my 21 years here there has been a
serious conversation about dealing with the entitlement
programs” such as Social Security and Medicare, Boehner said at
a Dec. 14 breakfast sponsored by Politico.com, a political news
web site. “We are talking about real change,” he said, adding
that he wasn’t surprised the public has a low opinion of
Congress.

Democratic leaders see it differently. House Minority
Leader Nancy Pelosi, a California Democrat, told reporters today
it was a “year of missed opportunities and made-up crises.”

The nation has “been engrossed in a year of manufactured
crises, with multiple threats of a government shutdown and an
increase of uncertainty for business and in our markets as a
result of the debt ceiling being held hostage,” said Democratic
Whip Steny Hoyer of Maryland.

Independent analysts say that on the matter that dominated
-- deficit reduction -- the results are murky.

The nonpartisan Congressional Budget Office said the $38.5
billion in spending cuts in this year’s budget, agreed in April
to avert a government shutdown, cuts the deficit by just $352
million this year, with most savings coming later. Some money
cut from programs wouldn’t have been spent anyway, so it
wouldn’t do as much to curb a $1.3 trillion deficit, the CBO
said.

Automatic Spending Cuts

The debt-reduction measure adopted in August relies on
automatic spending cuts for about half of its $2.4 trillion in
savings over a decade. A congressional supercommittee’s
inability to agree on at least $1.2 trillion in cuts kicks the
debate over specifics into next year. To achieve the rest of the
deficit reduction, lawmakers must stick with annual caps on
spending for a decade.

Based on experience, Congress won’t stick with the deficit-reduction deal for more than a few years, said Stan Collender,
managing director of Qorvis Communications in Washington and a
former House and Senate budget committee aide.

“Budget deals are always modified, seemingly in seconds
after they’re enacted,” he said.